Needing guidance on what the correct route to take.

[Darrion Jackson]

Hello everyone, 

I am currently looking for guidance with two of my properties. One SFH in Illinois and a Townhouse in San Diego.

I bought the SFH in Illinois for 146000 in 2023. At the time it was bought, it was a primary residence, so I used an FHA loan, and I only put 3.5% down. I am looking to rent it out, but I don't have enough equity in the property to put it into an LLC. I'm wondering what route I should take to reduce my liability while renting it out, or should I just sell it completely? I am also going to be putting in about 10k worth of work to the property to get it ready to rent out, and at the moment, it will only rent for about $200 more than the current mortgage.

When it relates to my townhouse in San Diego, I did buy this with my VA loan. I bought it for 585,000 last year. This property needs work, 60k on the high end. With this property, I want to sell it here soon. I know I will have to pay capital gains tax, but I am okay with that. I am actually okay, if I don't make anything because I am selling to buy a multiunit in San Diego, plus I will represent myself in the transaction to sell the San Diego property and buy the multiunit, so I will make money there at minimum.

I would like to finance the whole 70k to get both properties where they need to be, but I am not sure how I should finance the money to fix up the properties.

[Denise Supplee]

Hello @Darrion Jackson,

With 45+ years in real estate, I’d say don’t rush into anything. A lot of investors get themselves in trouble trying to solve every problem all at once.

On the Illinois property, you do not need an LLC to rent it out. Good landlord insurance and possibly an umbrella policy can go a long way toward reducing liability. Personally, I would look hard at whether the property makes sense long term if it is only cash flowing around $200 before repairs, vacancies, and future expenses.

For the San Diego property, I’d be careful about putting $60K into a place you already plan to sell. I’d focus on the repairs that truly help resale value and skip the rest. Also, cleaning, decluttering and making it look nice from the outside can help as well. 

I hope all works out well for you! I am sure it will.